Non-wires solutions, or NWS, can help lower spending on distribution systems while reducing greenhouse gas emissions, but barriers are blocking their widespread use, according to a “playbook” for utilities and policymakers.
In the last decade, regulated utilities spent on average $55 billion a year on distribution, transmission and generation investments, with the largest share of the spending going to the distribution system, Rocky Mountain Institute said in its report.
Cost-effective NWS — distributed supply-side and demand-side resources that target specific places on the grid — can be used to address distribution system needs, delaying or replacing more expensive alternatives, RMI said in its report, The Non-Wires Solutions Implementation Playbook: A Practical Guide for Regulators, Utilities, and Developers.
NWS, such as solar photovoltaics, energy storage, energy efficiency and demand response, provide a range of benefits that include cost savings, planning flexibility, greenhouse gas emissions reductions, opportunities to test new business models and local economic development, according to RMI, a Boulder, Colorado-based non-profit that supports using markets to shift from fossil fuels to efficiency and renewables.
Using NWS to reduce peak load could save $17 billion through 2030, according to the report. RMI estimates widespread NWS use could “conservatively” reduce greenhouse gas emissions by 300 metric tons over 20 years.
There are three main barriers to NWS: regulatory frameworks, utility planning and utility procurement practices, according to RMI. Traditional cost-of-service regulation, for example, can spur utilities to spend on infrastructure to earn a return on investment and can discourage cost-saving NWS, the report said.
“Although utilities across the nation spend tens of billions of dollars each year on distribution infrastructure, only a few have pursued NWS at scale,” the report said.
Lawmakers, regulators, utilities and developers need to work together to help develop the NWS market, according to RMI.
RMI’s playbook is based on interviews with 65 experts in 15 states, including more than 20 utilities, as well as developers, regulators and trade associations.
The recommendations in the playbook can be adapted to different contexts, including utilities that are vertically integrated, wires-only and consumer-owned, such as municipal and cooperative utilities, according to RMI.
In a section on best practices, RMI calls for establishing supportive regulatory environments. “The regulatory framework at its best can elicit flexible responses from utilities and solution providers to ensure reliability and meet cost-reduction goals, without being overly prescriptive,” the report said.
Appropriate incentives are needed to encourage utilities to pursue NWS projects, RMI said, noting that public power utilities are different because they are non-profit. “So long as management incentives are aligned with members’ interests, co-ops and munis would be inclined to consider NWS if they are more cost-effective,” the report said.
Utilities need to integrate NWS into their planning process, the group said. “Advanced utility processes can allow for the fair comparison of NWS against traditional solutions and encourage the effective engagement of external market participants to best meet regulatory and utility-level objectives,” the report said.
Also, utilities should reexamine their procurement practices to see if they support NWS options, according to the report.
“In this emerging market, developers require more access to grid and customer data than is required for traditional solutions,” RMI said. “Similarly, utilities will need additional information from solution providers to verify the technical feasibility of their proposed solutions projects and to perform benefit-cost analyses.”
Besides describing best practices for developing NWS programs, the report laid out core elements for successfully implementing non-wires programs that include screening criteria to identify potential projects, competitive solicitation process, evaluation frameworks for assessing proposed projects and contract terms that are tailored to NWS characteristics.